CNBC Fed Survey Results: September 19, 2011

8/4/2019 CNBC Fed Survey Results: September 19, 2011

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CNBC’s Fed Survey – September 19, 2011

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FED SURVEYSeptember 19, 2011

These survey results represent the opinions of 59 of the nation’s top money managers,

investment strategists and professional economists.

They responded to CNBC’s invitation to participate in our online survey. Their responses werecollected on September 14 and September 15, 2011. Participants were not required to

answer every question.

Results are also shown for identical questions in our July 20 and August 8, 2011 surveys.

This is not intended to be a scientific poll and its results should not be extrapolated beyond those who did accept our invitation.

1. Will there be another Federal Reserve quantitativeeasing program in the next year (12 months)?

19%

68%

13%

46%

37%

17%

34%

59%

7%

0% 20% 40% 60% 80%

Yes

No

Don't Know/Unsure

July 20 Survey August 11 Survey September 19 Survey




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2. For those respondents who replied ‘Yes’ to question#1: How large do you expect the new quantitative

program will be over the next year (12 months)?Please do not include reinvestment of maturingsecurities.

$377

$628

$527

$0

$100

$200

$300

$400

$500

$600

$700

Average (In Billions)





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3. For those respondents who replied ‘Yes’ to question#1: At which meeting of the Federal Open Market

Committee do you think the Fed is most likely toannounce a new QE program?

25%

30%

15%

5%

15%

5%

5%

0%

0%

0% 5% 10% 15% 20% 25% 30% 35%

September 2011

November

December

January 2012

March

April

June

July

September 2012




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4. Will the Fed conduct an "Operation Twist" in which itsells short-term securities in its portfolio and buys

long-term securities?

69%

20%

10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Yes No Don't Know/Unsure




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5. For those respondents who replied ‘Yes’ to question#4: At which meeting of the Federal Open Market

Committee do you think the Fed is most likely toannounce an "Operation Twist?"

78%

18%

0%

5%

0%

0%

0%

0%

0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

September 2011

November

December

January 2012

March

April

June

July

September 2012




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6. How big do you think a full-scale "Operation Twist"would be?

0%

5%

10%

15%

20%

25%

30%

$100B $200B $300B $400B $500B $600B $700B $800B $900B $1T

Average: $391.2BDon’t Know/Unsure: 13%




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7. In which range of maturities do you expect the Fed

would concentrate its purchases in an "OperationTwist?"

40%

33%

3%

5%

13%

8%

0% 10% 20% 30% 40% 50%

5 to 10 years

10 to 15 years

15 to 20 years

20 to 25 years

25 to 30 years

Don't know/Unsure

Average: 12.6 years




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8. How would you characterize the Fed's currentmonetary policy?

41%

52%

3%

5%

26%

52%

12%

10%

39%

40%

12%

9%

0% 10% 20% 30% 40% 50% 60%

Too accommodative

Just right

Too restrictive

Don’t know/Unsure





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9. Where do you expect the S&P 500 stock index will be on … ?

10. What do you expect the yield on the 10-year Treasury notewill be on … ?

1364

1421

1252

1310

1254

1312

1,150

1,200

1,250

1,300

1,350

1,400

1,450

December 31, 2011 June 30, 2012


3.41%

3.75%

2.61%

2.99%

2.25%

2.59%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

December 31, 2011 June 30, 2012





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11. What is your forecast for the year-over-year percentage

change in real U.S. GDP?

12. Where do you expect the fed f unds target rate will be on … ?

2.47%

2.85%

1.86%

2.47%

1.68%

2.24%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2011 2012


0.21%

0.47%

1.01%

0.11%

0.13%

0.25%

0.13%

0.16%

0.27%

0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2%

Dec 31 2011

June 30 2012

Dec 31 2012





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13. What is the probability, in your opinion, that eachof the following countries will default on its debt in the

next three years? (0%=No chance of default,100%=Certainty of default)

Germany, France, and United Kingdom were not included in the July 20 survey

52%

48%

24%

83%

28%

4%

45%

37%

23%

70%

25%

2%

2%

3%

2%

41%

34%

23%

82%

24%

1%

2%

4%

2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 1

Portugal

Ireland

Italy

Greece

Spain

United States

Germany

France

United Kingdom





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14. In the next 12 months, what percent probability doyou place on the U.S. entering recession? (0%=Nochance of recession, 100%=Certainty of recession)

0%

5%

10%

15%

20%

25%

30%

35%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

August 11 Survey September 19 Survey

Average Probability of Recession

August 11 Survey: 34.0% September 19 Survey: 36.1%




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15. Do you believe the American Jobs Act, if passed as

proposed by President Obama, will lead to:

0%

57%

38%

5% 0% 0%0%

10%

20%

30%

40%

50%

60%

Largeemployment

gains

Moderateemployment

gains

Noemployment

gains

Moderateemployment

losses

Largeemployment

losses

Don'tknow/Unsure




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16. Which parts of the American Jobs Act do you

believe are likely to pass Congress?

87.3%

80.0%

56.4%

29.1%

27.3%

3.6%

1.8%

0% 20% 40% 60% 80% 100%

Payroll tax cuts for employees

Payroll tax cuts for employers

Unemployment insurance extension

Aid to states and local governments

Infrastructure extension

None

All




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17. What is your primary area of interest?

Comments:

John Roberts, Hilliard Lyons: We are hearing from management teams that the best

stimulus to allow for job growth would be a roll-back of regulations that are resulting inadditional costs and uncertainty on business.

David Kotok, Cumberland Advisors: Congress’s inability to put national interest above

political re-election is the most serious threat to economic recovery.

Richard Steinberg, Steinberg Global Asset Management: The cap in muni interest for

well-healed investors is a flawed thought process in Obama's new plan. If school districtshave trouble raising money, won't that negate the potential benefit of pumping federal moneyinto schools? Can you say, ‘Zero Sum Game?’

Chad Morganlander, Stifel Nicolaus: It’s in no one’s best interest to relive 2008. The IMFwill become the main actor in solving the European debt issue. Expect the Fed to announce

additional quantitative easing. This action will scotch the fear trade, tighten credit spreads

and send Treasury yields higher.

Joseph LaVorgna, Deutsche Bank: The Fed has given the dollar short shrift, not fullyaccounting for the currency's effect on commodity prices; global growth concerns should be

manifest in much lower energy prices, akin to what we saw in Q1 2009.

Hugh Johnson, Hugh Johnson Advisors: To avoid an outcome as experienced in 1910-1912 or 1937-38, policymakers must not make a hard shift toward fiscal restraint. Given the

Economics45%

Equities22%

Fixed Income18%

Currencies0%

Other15%




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differences on tax and spending policy that exist between the Administration and theRepublican Party, it is hard to make the case that the shift to restraint will be avoided despite

the continuous warnings from Bernanke, Elmendorf, and others.

John Augustine, Fifth Third Asset Management: The only way Washington can impactemployment between now and the election is a new version of the CCC or WPA.

John Donaldson, Haverford Trust Co.: Remember that QE is a tool designed to stave off

deflation. We are very far from that risk. Any further QE would serve very little purpose.

Marc Pado, Cantor Fitzgerald: Recessions typically start from ‘excess.’ We do not have

excess inventories, interest rates, corporate debt, employment costs, or speculation. It would

require an ‘outside shock,’ and if Europe is not it, then the odds are remote.

Guy LeBas, Janney Montgomery Scott: If passed as-is, the administration's jobs act (we

call it stimulus v.2) has the potential to increase GDP growth by as much as 1.5% in 2012.That said, once the stimulus money runs out, any jobs created by infrastructure spending turninto pumpkins.

Stuart Freeman, Wells Fargo Advisors: We continue to target a slow growth path for theU.S. economy. Our earnings estimate for next year is $106, representing a 4.4% increase.That number might be higher if borrowing demand picked up through the end of this year and

into next year. Currently, consumers are still deleveraging. In our opinion, the equity

markets are suggesting the odds of a recession are closer to 50% versus the actualfundamentals. The actual economic fundamentals suggest the likelihood of a U.S. recession isonly roughly 25%, in our opinion.

Michael Painchaud, Market Profile Theorems: Most often, simpler is better. An

administration program concentrated on providing direct 3-year term loans to companiesunder 100 employees, who were in business for at least 5 years, tied to NEW hiring (netincrease in employment at the firm), and at current fed funds interest rates, would have beenmuch more efficient in creating new jobs, and would create less risk to the taxpayer. Put thedecision making as to how funds are spent into the hands of the private sector and not the

government. The government has to realize it is an enabler - not an employer who can drivelong-term, healthy economic activity. Hopefully, some day that simple fact will dawn on them.

David Goerz, Highmark Capital: Any bill to promote job growth will look nothing like what

the president has proposed, and should include a lower tax rate on repatriation of earnings.Tax reform is looking increasing likely to be taken up by the deficit commission. Pending tradeagreements should be finalized before Dec. 1st, as well. Fed policy is too accommodative as

inflation becomes increasingly entrenched, extending beyond simply high commodity prices.Date certain interest rate accommodation has boxed in the Fed and was unnecessary as well

as ineffective. Paying interest on excess reserves is helping no one at this point, so cuttinginterest rates on reserves remains a more rational option than increasing the duration of the

Fed's portfolio with Treasury 10-year yields already at an exceptional low and unsustainablelevel near 2% and accelerating inflation above 3.5%.




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Drew Matus, UBS Investment Research: Op Twist, if conducted, would be balance sheetneutral rollovers into 7-10 year sector. We do not see an interest on reserves cut as meeting

cost benefit analysis of the Fed as it may only make things worse.

Mike Englund, Action Economics: The stimulus strategies now on the table have directbeneficial effects but adverse expectations effects, as small business managers are proving

increasingly skeptical about fiscal and monetary policy imbalances. Both policies have beentaken past the point of a net positive impact, and the problem is exacerbated by the lack of

willingness of policy advocates to adequately address criticism. Policy is increasingly looking

like a ‘runaway train’ to managers who make hiring decisions.

Dean Baker, Center for Economic and Policy Research: There has been a hugely

misplaced focus on the risks of a double-dip recession. We will only see a double-diprecession if the euro crisis leads to a Lehman-type meltdown. The real risk is the continuationof pathetic growth (e.g. 2.0-3.0 percent) rather than the robust growth (4.0-5.0 percent) that

we need to bring the economy back to full employment.

Alan Kral, Trevor Stewart Burton & Jacobsen: Fed will continue to do all it can to turnthe economy.

Rob Morgan, Fulcrum Securities: The 19% slide in the S&P 500 that culminated at thebeginning of August may signal a U.S. recession, but as there are so many indicators

inconsistent with recession (yield curve, corporate profits, ISM index, Labor Department job

postings) it may also be pricing in a disorderly Greek default. Any outcome which isperceived by the markets as being 'better' than that could allow the S&P 500 to rally.

Lou Brien, DRW Trading Group: Measures of consumer confidence already suggest that anew recession has begun, but it can also be said that for many consumers the recession

never ended. The overhang of debt, some of which will never be repaid, has and will continueto be an important drag on the economy for years, until losses are realized and debt burdenis removed.

Constance Hunter, Aladdin Capital: Europe may have bought more time with the latest

efforts of Sarkozy and Merkel but Lagarde’ s four Rs - repair, rebalance, reform and rebuild -create the most credible outline of any leader on either side of the Atlantic. Furthermore,until European banks mark to market all of the assets on their books (including the zombie

assets) it will be nearly impossible for them to assuage market fears and the accompanying

economic drag of low confidence. In the U.S. more and more analysts are now expectingunconstructive numbers on both the output and price side yet we find it hard to becontrarians here.

Dennis Gartman, The Gartman Letter: The Fed has no choice but to continue to keep the

overnight fed funds rate at or near zero, but twisting the yield curve will do damage to thenation's banks that are best served by a positively sloped curve. Hence I think an ‘Operation

Twist’ would be detrimental to the banks and thus to the economy; but I fear it may happenanyway.

Robert Brusca, Fact and Opinion Economics: The American Jobs Act is a piece of duplicitous politics. The president has put so much of his political capital into it using slanted




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rhetoric while the plan is so different from the way he has described it that I see it asdamaging his credibility. This is NOT a plan Republicans can back - AND HE KNOWS IT. It has

huge tax increases in it, among other things. The most ineffective 'job creating' aspects of

the bill are the most likely to pass. The president has confused a JOBS SHORTAGE, which is asymptom of the lack of demand, as the problem itself. As a result he has proposed ineffectivecost-cutting microeconomic solutions to what is really a macroeconomic problem which is a

demand shortfall. Simply put, lower job costs will not lead to hiring if demand does not pickup.

Hank Smith, Haverford Investments: I have said this before but it bears repeating.Monetary policy has been excellent. What we need now is better fiscal policy, and increased

spending is off the table so that means a better pro-growth tax policy and a pro-growth

regulatory environment (which means fewer regulations.) Unfortunately, it appears we willneed the 2012 elections to get better fiscal policy. So absent an external shock, which wouldthrow us into a recession, the economy will be stuck in a slow growth sluggish environment.

Lynn Reaser, Point Loma Navarene University: An ‘Operation Twist’ would have littlestimulative effect on the economy even if not offset by actions by the Treasury (issuance of more long-term debt). For the Fed to provide another dose of stimulus, it will need to

increase the supply of money and credit. Further expansion of the Fed’s balance sheet will berequired rather than a change in its composition. An ‘Operation Twist’ program would alsohave some adverse side effects. A flattening of the yield curve would adversely affect bank

profitability and aggravate the drive to raise capital.

Brian Gendreau, Financial Network: I believe the equity markets will be range-bounduntil there is political agreement on debt stabilization on both sides of the Atlantic.

Subodh Kumar, Subodh Kumar & Associates: ‘Mantra of Finance’ needs to change back

to basics, including ring fencing of so far unfettered intervention by authorities and excessconsensus earnings expectations. More focus is required on restructuring. Until then,volatility is likely to remain enhanced thorough 2012.

Chris Rupkey, Bank of Tokyo-Mitsubishi: It's always darkest before the dawn. Cheer up.

Things are not as bad as you think. No major loss of jobs yet, and you cannot have adownturn in the economy without the unemployment rate rising. It isn't rising so not surewhy the Fed is trying to get out ahead of ‘renewed’ economic weakness. They need to be

careful that their communications are not adding to the pessimism. Saying they will keep

rates low till mid-2013 may reinforce soft patch economic conditions until mid-2013.

Kevin Ferry, Cronus Futures Management: It's always darkest before the dawn. Cheer

up. Things are not as bad as you think. No major loss of jobs yet, and you cannot have adownturn in the economy without the unemployment rate rising. It isn't rising so not sure

why the Fed is trying to get out ahead of ""renewed"" economic weakness. They need to becareful that their communications are not adding to the pessimism. Saying they will keep

rates low till mid-2013 may reinforce soft patch economic conditions until mid-2013.

Robert Shapiro, Sonecon: The great unknown, and it's a very powerful one, is whether the

sovereign debt crisis will reach Italy and Spain. If it does, European banking will be




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insolvent; and we will find ourselves in the middle of another financial meltdown. This time,however, there are very few fiscal or monetary policy responses available.

Tom Porcelli, RBC: We answered yes in question 1, but it’s not that black and white. As astarting point, we don’t believe the Fed has the ability to jump start economic activity.Nevertheless, they will not sit idly by while economic conditions deteriorate. We think the Fed

will start with some form of ‘Operation Twist,’ and as economic conditions continue todeteriorate, the odds of QE will continue to rise.

Mark Zandi, Moody’s Analytics: Whether the U.S. economy suffers a recession in the nextyear also critically depends on how European policymakers handle their sovereign debt and

banking crisis. If Greece defaults anytime in the next few months or something worse, the

European economy will suffer a severe recession and also drag our economy into the abyss.

Documents

CNBC Fed Survey Results: September 19, 2011